Story:
Force Change From The Bottom

By Matt Shlosberg - Managing Director at Hanna Concern

June 13, 2010 at 9:27am

Leadership

Management

change management

Moonshots

Reinvent the means of control

Enable communities of passion

Make direction setting bottom-up and outside-in

Summary

Organizational change usually comes from people at the top. Employees often find it hard to create change in the organization because they aren't heard. This story shows how one organization got it the other way around.

Context

A few years ago I consulted for the business process outsourcing company whose name I can't mention for contractual reasons (I signed an NDA stating so). This organization had about 200 people. One of their weaknesses was their inability to hire the right people in put them in right positions. As a result, they had lots of employees who shouldn't have been there.

Triggers

The company had reasonably competent operations people at the top but very incompetent junior managers. These junior managers didn't know much about operations, quality, and goals. They didn't care about their jobs. They came from rank-and-file employee ranks and didn't know anything about management. Performance level and quality level were low. To make things worse, these junior managers weren't honest about their performance and constantly covered up their screw ups or their unwillingness to work.

Key Innovations & Timeline

Employees in the IT (information technology) organization were well aware of the issue. They first brought up the issue to top management, hoping to make a change, but top management didn't listen. The message came across to them as that of the top management not being able to hire the right people and not knowing what's going on in their organization. Top management didn't believe the facts presented and refused to accept the problem.

The IT organization then found a solution. They independently defined and collected performance metrics of the poor performing organizations. They then created a real-time dashboard showing target and actual performance numbers. This dashboard showed the performance level promised to customers, the actual numbers achieved, and the source of the problem. Every metric that was inline with expectations was labeled in green color. Those that weren't were red with a big bold flashing ALERT sign next to them.

IT then installed a huge monitor displaying this real time dashboard in the hallway every employee walked through a dozen times a day. This dashboard was visible to everyone. No one could say they missed it. In addition, an end-of-day status dashboard was e-mailed to all top managers and junior managers who previously didn't care.

IT justified this project as a part of the effort to manage quality in the organization, so it was well accepted. Once these dashboards became available, IT didn't have to say a word anymore. These dashboards became a self-governing, unspoken way to communicate the problem. Top managers started investigating red ALERTs. Shortly thereafter, junior managers either fixed their processes or were fired. Top managers liked these dashboards so much that they now required every manager to them it as a bible. The dashboard software was installed on every manager's computer, so everyone could see every potential issue in real time.

Once the problem was solved and every line item on the dashboard turned green, IT used this strategy to solve other problems in the organization. For every problem discovered, it would create a dashboard and show red alerts. These dashboards were so trusted that they became the de facto standard for things that needed to be done. No one questioned them anymore. If managers saw red alerts, they did something about it.

IT essentially became the department running the whole company. Most decisions now originated from IT. In order to create democracy of information, IT solicited feedback from other departments. Any new ideas were evaluated by business process analysts. If they made sense, they made it into dashboards. Top management was no longer in control. The firm was now controlled by those who had the right information at their fingertips.

Challenges & Solutions

There were some challenges at first. Junior managers dismissed these dashboards as those mis-stating the facts. To solve this problem, IT told top management it will work with junior managers to redesign dashboards to show the right information. Junior managers were then asked by IT for justification for any changes. These managers had to demonstrate any flaws in the system. Thankfully, this operation was driven by hard numbers (e.g. how many widgets can a worker make in an hour?) and there was no space for excuses or misunderstanding. At the end of the day, junior managers had to agree that the initial approach taken by IT was right.

Benefits & Metrics

IT was now able to communicate ideas to top management in a more effective way. They were now heard.

Lessons

People deny problems unless they are obvious and are visible to everyone else. When that happens, their natures dictates them to go and fix these problems.

Credits

I came up with this idea and led its implementation.

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June 17, 2010 at 4:30am

David Sims

This in interesting: another MIXer, Madhusudan Rao, has just posted a Hack along a similar line: leaderboards for managers. With both, I wonder how many jobs lend themselves to such an objective display -- in this case, green (succeeding) or red (failing).

But I also get, from your title Matt, that's not the main thrust of your story. Rather, it's how IT was able to use its understanding of the way the organization functioned, combined with their ability to measure activity, that allowed them to force change from the bottom up. Of course, this also shows the tremendous power of IT in today's organizations. I recently read that up to 70% of the expected synergies in most mergers are either within IT or dependent on IT. Wouldn't be surprised if it was even higher.

June 18, 2010 at 6:27am

Matt Shlosberg

David -

Thanks for the comment. Let me add to what you just said. It's not IT that has power in the organization but those who have access to information. Of course I in IT stands for Information, so IT happens to be the information king.

We live in the age of information. According to Gartner Group, the amount of information available to people doubles every year. This means that companies lose more and more control and become hostages of IT. Companies either have to learn how to use IT as a competitive advantage, fall prey to smart IT organizations that can control them, or die or information starvation.

June 21, 2010 at 10:20am

David Sims

Well, I think it's undeniable that companies have to learn how to use IT (or, more specifically, information) as a competitive advantage. If they fail to do that, IT will be the least of their problems: they won't survive against competitors who make better use of information.

I'm more and more confident, though, that companies won't become hostage to their own IT departments. Ten years ago, I saw signs of that during the first dotcom boom, and there was an angry backlash against CIOs and their departments in the years around 2001-2004 after the business felt hoodwinked by IT's embrace of expensive technologies that delivered little.

But since then, two interesting developments have shifted the landscape.

First is the rise of so many Web 2.0 applications that have made it easy to route around IT when it becomes a roadblock. All the free and inexpensive third-party services (whether email, stats, social media, application development) are available on the Web to any employee who wants to start up a program and can't get IT's resources. IT's first reaction was to clamp down/block/prohibit those services because they don't have control over them. But then managers can ask the reasonable question, if we can get this for cheap outside of our company, why shouldn't we? The burden falls on IT to come up with valid reasons to prevent business from moving forward or to develop something internal and better. This has had a HUGE impact on innovation, in my opinion. It's forced IT to step up its game and compete with the smart entrepreneurs who are offering competitive services, usually for very little money.

The other shift is subtler, but I think workers of all stripes are increasingly comfortable with technology, and many are able to develop their own online programs or even do a bit of coding. There's no longer as solid a line between the business people and the nerds in IT. Smart folks, especially those under 35, are increasingly comfortable in both camps. The flip side is that IT people are getting closer to the business. The more they can have a positive impact on the business -- as in your example, where they forced better hiring decisions by revealing performance metrics -- the more they are seen as integral to the company's performance and not merely folks who keep the email flowing.

June 21, 2010 at 10:59am

Matt Shlosberg

David,

You are right. I've actually seen both trends take place and I've seen IT fight back. At the end, smart IT departments always win. The major reason is lack of integration and support. When users select third party Web 2.0 / SAAS applications, they often don't realize what roadblocks they'll hit. History taught them that their IT can overcome all roadblocks, so they expect their SAAS vendor to overcome these roadblocks for them. But vendors have no interest in such projects. Consider Salesforce.com. I've seen customers invest significant dollars into Salesforce.com implementations just to find out that there's something critical Salesforce doesn't do. The response from Salesforce is often "sorry, we don't have this feature and have no intents to develop it at this point."

I've been a CIO myself and I've had to deal with this. Typically, I'd sit down with end users and show them all Pros and Cons of going with third party vendors or developing apps themselves. In vast majority of the cases, users would then abandon the idea. If they didn't, I'd warn them that I can't support third party applications not under my control. Then 80% of them would abandon the idea. If they didn't, they'd go with a third party application, hit a roadblock and come back to me.

So, IT is still powerful and will be for years to come.

Another concept to consider is the system. If users are unhappy with IT, do they have the right IT people and/or structure in place? In the right environment, users shouldn't be considering the two trends you are mentioning. IT should be a partner, not a necessary evil.